Zesa reeling under $1 billion debt

Published: 20 October 2017

THE debt and scandal-ridden Zimbabwe Electricity Supply Authority (Zesa) owes its local and international suppliers close to US$1 billion and is only managing to service interest accrued on loans without settling premiums, the Zimbabwe Independent has learnt.

This comes at a time Zimbabwe is constantly being threatened with power cuts from South African power utility Eskom for non-payment of electricity imports. Zesa recently paid US$12 million to Eskom to avoid being switched off after breaching terms of payment agreed to in July this year.

Zesa's 2016 annual report seen by the Independent shows that the parastatal has non-current liabilities totalling US$130 946 147.

On its current liabilities, Zesa has trade payable and accrual which amount to US$467 979 426, current portion of long-term loan (US$397 580 507), finance lease liability (US$20 101 181), while its bank overdraft stands at US$5 632 749.

The huge debt comes at a time Zesa, through its subsidiary Zimbabwe Power Company (ZPC), is struggling to generate enough electricity to meet the country's needs.

The parastatal has also embarked on a number of projects to boost electricity generation but most projects have been heavily inflated and have become an albatross around the parastatal's neck.

Zesa is refurbishing its power stations while also working on expansion projects at the Kariba Hydro Station and Hwange Thermal Station. However, the projects are taking time to complete, forcing the country to rely on power imports.

As at the end of September, the parastatal was generating about 1 130 megawatts (MW) daily while importing up to 450MW from Eskom and Hydro Cahora Bassa of Mozambique to augment electricity supplies.The country consumes about 1 600MW daily. Zesa owes Eskom US$44 million and Hydro Cahora Bassa US$10 million although at some point the figure was higher.

While Zesa's loan bill has been increasing, in her report on State Enterprises and Parastatals for the financial year ending December 31, 2016, former Auditor-General Mildred Chiri exposed the rot at Zesa and its subsidiaries including the Zimbabwe Electricity Transmission and Distribution Company (ZETDC).

According to the report, ZETDC paid Powertel close to US$10 million as commission for selling prepaid electricity to wholesalers, something it could have done itself. The electricity supplier also suffered a financial loss through under-billing with some meter readings last conducted in 1984.

"Without qualifying my audit opinion, I draw your attention to the fact that the company incurred a loss before tax of US$111 474 084 (2014: US$118 312 961) for the year ended December 31, 2015 and as of that date its current liabilities exceeded its current assets by US$771 383 372 (2014: US$958 567 146).

"The company also had an accumulated loss of US$516 649 272 (2014: US$438 326 775).

"These conditions along with other matters indicate the existence of a material uncertainty that may cast significant doubt about the ability of the company to continue operating as a going concern," said Chiri.

ZPC has been rocked by massive tender scandals. The controversial power generation projects were inflated by more than US$500 million as revealed by the Independent and confirmed by players in the industry.

Zimbabwe is working on the Kariba South Power Expansion project and the Gairezi Hydro Project among other projects.

Former energy minister Elton Mangoma, who negotiated the deals during the inclusive government era from 2009 to 2013, in May last year revealed the project costs were heavily inflated.

The Gairezi Project was awarded to a consortium led by Wicknell Chivhayo's Intratek. Mangoma said the Gairezi project cost had shot up to US$248 million, up from the initial US$90 million. This created a variance of US$158 million.

The Kariba South Power Extension project, which was officially commissioned by President Robert Mugabe in September 2014, was initially pegged at US$355 million, but shot up to US$533 million. The cost escalation was US$178 million. The inflated costs in total amount to US$507 million.

Mangoma told the Independent then that the terms of the projects had also been altered, massively prejudicing Zesa.Zimbabwe is planning to construct three solar plants, each generating 100 megawatts. The initial cost, as of 2014, was US$183 million for each of the projects, bringing the total cost to US$549 million.

The solar tenders were won by China Jiangxi Corporation (CJC), ZTE Corporation and Intratrek Zimbabwe.

Soon after winning the tenders, the companies demanded price escalations, resulting in the projects being pegged at US$240 million each, bringing the total cost to US$720 million. This meant a variation of US$171 million from the initial costs.

However, in July this year Intratrek reduced its price for the Gwanda solar project to US$140 million after the intervention of the Finance Ministry, which demanded a review of the project costs. - zimbabwe independent